Business success typically relies on a business carrying out its planned activities uninterrupted. It can, therefore, be beneficial to have insurance to cover lost income, should an unexpected event prevent business as usual – but only if the insurance policy has been taken out correctly.
Business Interruption insurance is the cover that can step in to put the business in the same position after its loss, as if the loss had not occurred. When taking this out, a business has to calculate its anticipated income and costs and insure for the difference between the two – the estimated gross profit. That is where the business benefit from a broker’s guidance.
Many businesses think about their gross profit estimate in accounting terms, using figures their accountant produces for their end-of-year figures. That is not, however, the figure an insurer uses. When it comes to insuring gross profit for Business Interruption purposes, it is an Insured Gross Profit (IGP) figure that is required, not Accounting Gross Profit (AGP).